TheMReport — News and strategies for the evolving mortgage marketplace.
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16 | TH E M R EP O RT COVER STORY A s 2018 sets in motion, government regulatory requirements are com- pletely changing the pace and manner in which the mortgage industry does business. Mortgage professionals attempt to develop the best strategies and tactics to comply with the regula- tory environment, but apprehen- sions come to mind. Implementing the right plans to properly tackle specific regula- tions might not be what's difficult, but rather the sheer volumne of regulations, quick change of pace, and ambiguity are what creates challenges. For example, in a call center en- vironment a loan originator is re- quired to: Read a recording script based on state call-recording laws; ask for permission to pull credit by the Fair Credit Reporting Act (FCRA); properly disclose to a consumer why they're asking for their race, ethnicity, and gender by the Home Mortgage Disclosure Act (HMDA); and adequately disclose the terms of hundreds of products under the unfair, deceptive, or abusive acts and practices(UDAAP) regulations enacted under the Dodd-Frank Act of 2010. These regulatory require- ments must be executed perfectly at a time when the reality of a consumer filing a complaint for missing even one of these requirements has become part of the job. Given these increasing pressures, mortgage professionals are justifiably cautious of compli- ance hurdles. Should the industry be concerned the focus over compliance is getting in the way of serving the consumer? In the Name of Compliance T he scope of compliance laws and regulations facing compa- nies has been increasing over the last 15 to 20 years. Since the 2008 financial crisis, in particular, the industry has seen greatly expand- ed regulatory oversight, including requirements emerging from the Dodd-Frank Act as well as the Consumer Financial Protection Bureau (CFPB). In the past, a typical com- pliance staff was made up of generalists who managed compli- ance with all legal and regula- tory requirements, according to Carol Wambeke, SVP and Chief Compliance Officer for Freddie Mac. With the proliferation of new legal obligations, compli- ance professionals have had to develop specific areas of compli- ance expertise, such as consumer protection, information, privacy, and anti-money laundering. As a result, following the Great Recession, the availability of funds from government and private in - vestors also reduced dramatically. According to Peter Macdonald, General Counsel, loanDepot, this also greatly limited the ability of lenders to extend loans to bor- rowers, even if they might have been creditworthy. "To that end, mortgage profes- sionals have an ever-present fear of being regulated out of busi- ness," said Macdonald. "Loans are harder to make today than they were 10 years ago. With every new regulation that is implement- ed, that difficulty only increases." Part of that is by design. No one wants to go back to the pre-2007 lending practices, which contrib- uted to the financial meltdown by putting consumers into homes they couldn't afford. The challenge is finding the right balance of compliance regulation to ensure that bad ac - tors don't lead the industry down the path that led to the Great Recession, while still allowing mortgage professionals to lend. While mortgage professionals strive to ensure their production staff follows all laws and regula - tions, in many ways they face a daunting task in striving to adhere to so much in the name of compliance—they must be mort- gage and compliance professionals at the same time. "As the volume and scope of compliance requirements have grown, compliance professionals have had to specialize in specific areas," said Wambeke. In addition to the increasing volume and scope of regula - tory requirements, the pace of change also is a challenge, said Karen Sabatowski, EVP, Chief Compliance Officer of Flagstar Bank. As things come so fast and furious, it's challenging to have adequate time and resources to implement changes required by updated or new regulations. New rules require extensive review of processes and products in order to implement changes A Balancing Act With Compliance Regulation Compliance has been a top concern for mortgage professionals for the past several years. From implementation and technological difficulties to being left in a state of uncertainty—how can the industry keep focus on the core mission of serving the housing market and making the American Dream more accessible? By Nicole Casperson